The collapse of the FTX Derivatives Exchange has contributed to a joint call for crypto regulation amongst regulators worldwide.
The International Monetary Fund (IMF) has made a call for greater consumer protection laws in Africa. Markedly, this international regulator recognizes Africa as a region where the crypto market is thriving and has continued to grow at a fast pace.
Faster than was expected, Africa is becoming a Bitcoin (BTC) hub. Even with its position as the world’s fastest-growing digital asset industry, the size of crypto transactions in Africa still trails that of Asia, Europe, and North America. Kenya, South Africa, and West African country Nigeria have the highest number of users presently. Moreso, only one-quarter of countries in Africa have actively regulated cryptocurrencies.
Precisely, only 25% of Sub-Saharan countries have officially regulated their crypto markets. Other two-thirds have imposed some kind of restrictions while six countries including Ethiopia have completely banned the use of cryptocurrencies.
The likes of Zimbabwe and Liberia have refused to officially take a stance on digital assets but are making several attempts to clamp down on Virtual Asset Service Providers (VASPs) in their respective jurisdictions. Such VASPs are not allowed access to banking services.
FTX Collapse Raises Regulatory Concerns in Africa
While crypto is used as a form of payment, its volatility makes it hard for it to be used as a store of value. Citing the liquidity crunch which pulled FTX down and led to its bankruptcy filing, the value of all cryptocurrencies including BTC and Ethereum (ETH) has plummeted. Apart from such fluctuations, there are fears that crypto may be used for illicit activities.
African regulators believe that digital Currencies may be used to fraudulently redirect funds out of the region.
Like in the case of Russia which has gone under the eighth wave of sanctions from the European Union (EU), it is assumed that crypto could be used to evade sanctions. Similarly, the “Widespread use of crypto could also undermine the effectiveness of monetary policy, creating risks for financial and macroeconomic stability,” the blog post outlined
Amidst all of these uncertainties, the Central African Republic (CAR) which launched its crypto hub project Sango has adopted crypto as a lender tender after El Salvador.